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New report says better metrics could have prompted stronger response to the crisis

27/11/2018 – Better measurement of the economy and of people’s well-being could have led governments to respond more strongly to mitigate the damage caused by the 2008 financial crisis and reduce people’s continuing loss of trust in public institutions, according to a new report.

Beyond GDP: Measuring What Counts for Economic and Social Performance says that different metrics, including of people’s economic insecurity, would have revealed that the consequences of the recession were deeper than GDP statistics suggested. As a result, the importance of bolstering safety nets and social protection was not sufficiently taken into account.

The report, produced by the three co-Chairs of the High-Level Group on the Measurement of Economic Performance and Social Progress, Professor Joseph E. Stiglitz, Professor Jean-Paul Fitoussi and OECD Chief Statistician Martine Durand, recommends that governments use a dashboard of indicators to assess a country’s health and people’s conditions.

This dashboard of indicators should encompass the most important dimensions of people’s lives, such as skills, health, jobs and income, as well as economic security, environmental degradation and trust. It should pay attention not just to average outcomes but also to how policies affect each of the segments of society, and give a balanced consideration to well-being today and in the future. These indicators should be broad enough to reflect key concerns, but narrow enough to be readily understood by policy makers and the public.

“It is only by having better metrics that truly reflect people’s lives and aspirations that we will be able to design and implement better policies for better lives,” said OECD Secretary-General Angel Gurría, launching the report at the 6th OECD World Forum on Statistics, Knowledge and Policy in Incheon, Korea. “It’s essential to try to establish the truth of people’s lives rather than the truth we find it most practical to study. This will play a key role in restoring people’s trust in institutions and supporting inclusive growth.”

“Too much emphasis has been placed on GDP as the leading measure of the health of economies and societies,” said Professor Stiglitz. “Ahead of the crisis this blinded policy makers to the dangers lurking and led them to make the wrong policy choices in the aftermath. If we do not look at the things that matter in life – whether that is inequalities, how people feel they are doing, their health and capabilities, or environmental sustainability – we cannot make the right choices for people, societies and the planet.”

“People can’t live without at least the hope of social progress,” said Professor Fitoussi. “This was the backbone of our work - we scrutinized the available metrics to determine how and why they might hide a regressive evolution, from economic security to trust, passing through sustainability, inequalities including those of opportunities, and other measures and determinants of well-being. The central question, instead of focusing on GDP, then becomes: growth of what and for whom?”

The report also evaluates progress made in developing metrics going beyond GDP since 2009 and in using them in policy making. It contains a set of 12 recommendations to move forward which include: urging the international community to invest in upgrading the statistical infrastructure of poor countries; allowing statistical offices to use tax records to capture developments in the top-end of the distribution; integrating information on inequalities in macro-economic statistics to understand who benefits from GDP growth; routinely assessing the effects of policies on people’s economic insecurity, to better measure sustainability and resilience; and, measure trust and social norms through both surveys and experimental tools.

An accompanying report, For Good Measure: Advancing Research on Well-being Metrics Beyond GDP, summarises the contributions to these debates by leading economists, political scientists, sociologists, psychologists and statisticians.

These reports are released at the 6th OECD World Forum on Statistics, Knowledge and Policy being held in Incheon, Korea, where international experts, policy makers, and business leaders from fields as diverse as the economy, the environment, health, development, social affairs, governance and statistics are discussing the trends that will re-shape people’s lives in the decades to come, as well as the information gaps that need to be filled to respond to the challenges ahead.

The report will serve as a reference for the OECD’s Better Life Initiative which focuses on developing statistics that can capture aspects of life that matter to people and that, taken together, help to shape the quality of their lives. It also encompasses a range of research and methodological projects on measuring well-being. This includes developing measurement guidelines (e.g. on income, consumption and wealth; subjective well-being; trust; and the quality of the work environment), and building the evidence base on the distribution of well-being outcomes (e.g. income, wealth, and health inequalities) and opportunities.